Question: Pitts Company owns 80 of the common stock of Shannon

Pitts Company owns 80% of the common stock of Shannon Company. The stock was purchased for $960,000 on January 1, 2009, when Shannon Company’s retained earnings were $675,000. On January 1, 2011, Shannon Company sold fixed assets to Pitts Company for $960,000; Shannon Company had purchased these assets for $1,350,000 on January 1, 2001, at which time their estimated useful life was 25 years. The estimated remaining useful life to Pitts Company on 1/1/11 is 10 years. Both companies employ the straight-line method of depreciation. The financial data for 2012 are presented here:

A. Prepare a consolidated statements workpaper for the year ended December 31, 2012.
B. Calculate consolidated retained earnings on December 31, 2012, using an analytical or t-accountapproach.

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  • CreatedMarch 13, 2015
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